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Thursday, May 26, 2022

LTC Properties to Diversify as Pandemic Recedes

For Wendy Simpson, chief executive of LTC Properties Inc., the biggest takeaway from the coronavirus pandemic has been the resiliency of the real estate industry.

LTC is a real estate investment trust, or REIT in Westlake Village with senior housing, assisted living and skilled nursing properties in 27 states.

In comments made in April to discuss first-quarter earnings, Simpson said she was proud of her team and the operators of the senior housing and health care facilities.  “We have built something to last,” Simpson said. “And while we were tested over this last year and continue to be tested, our work culture of treating operators as partners, and maintaining a solid balance sheet will serve us well as we continue to find creative ways to enhance our portfolio, diversify our investments and serve as a growth partner of choice.”For the quarter ending March 31, the company reported net income of $13.9 million (35 cents a share) compared to net income of $63.7 million ($1.60) in the same period a year earlier. Revenue dropped by 13 percent to $40.3 million.

Funds from operation, or FFO, a measurement used by real estate investments trusts to better gauge their finances, was $24.3 million (62 cents a share) in the first quarter, compared to $29.2 million (74 cents) in the same period a year earlier.

The company’s share price has gone up by about 9 percent in the past 52 weeks through June 22. Shares closed at $38.39 on June 30.

Jordan Sadler, a managing director at KeyBanc Capital Markets Inc. in New York, wrote in a research note on LTC that the company’s tenants were feeling pressure from COVID-19 in the first quarter that made it difficult to pay rent. About 87 percent of rent was collected during the January through March period.While some tenants have been bolstered by government assistance, others have failed to pay rent and have asked for and received rent relief, Sadler wrote.“These conditions have created interim turbulence in LTC’s rental income and FFO, though much should normalize in the coming quarters, as COVID-19 conditions recede and occupancies rebound from trough levels,” Sadler said in his note.

Simpson was optimistic in her comments during the conference call about occupancies rebounding.

“With the high percentages of vaccinations administered to the senior population, skilled nursing centers and assisted living memory care communities should begin welcoming new patients and residents at increasing frequencies from the lower levels that we’ve seen over the last 12 months,” she said.Acquisition pipelineIn his note, Sadler said that KeyBanc had reduced its 2021 and 2022 FFO per share estimates by 20 cents and 6 cents to $2.62 and $2.89, respectively. The reductions reflect the FFO miss in the first quarter and rent abatements for the second quarter of this year that will total about $2.2 million.“We suspect that most of the disruption may be transitory,” Sadler wrote in the note from May 4. “Rent abatements provided to operators should ease, as these operators regain lost occupancies if COVID-19 related hospitalizations and deaths recede in the coming quarters.” Pam Kessler, co-president and chief financial officer at LTC, said during the conference call that the company had provided during the first quarter $1.1 million in rent deferrals and $600,000 in rent abatements. For April, the company provided rent deferrals totaling $367,000 and rent abatements of $319,000.“We also have agreed to provide rent deferrals and abatements of up to $800,000 for each of May and June 2021,” Kessler said.

Clint Malin, co-president and chief investment officer, addressed future growth during the call.

He said that the company’s acquisition pipeline was more active than it had been in some time and that it had been making an increasing number of bids on properties.

“But we can’t provide specificity, with respect to when these deals or what kind of deals will be closed, as the market has not yet returned to normal and sales cycles have been elongated,” Malin said.

He was confident the company would close deals at the right price for the right return and use its liquidity to provide regional operators with the growth capital they need.“For now, we are focusing on smaller investments with what we believe to be a better risk-reward profile,” Malin added, “including mezzanine loans and preferred equity financing, several of which we have completed throughout the course of the pandemic.”

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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